Archive for the ‘Uncategorized’ Category

We have not yet had time to read carefully analyze the Servier Judgment rendered today by the General Court and I’m afraid we’ll need the weekend to process a few hundred pages in French and to comment on the many interesting points it surely raises. Expect to hear from us about this case early next week.

For now, and as an appetizer, I’ll just say that the outcome of the case and a mere read of the press release confirms something we had been saying for a while: Courts do carefully review market definitions when asked to, and are open to annulling them when justified.

The perception that applicants have low probability of success in overturning the Commission’s decisions on the point of market definition is (was?), in my view, based on a mere statistical analysis of the cases in which the GC was receptive to the applicants’ arguments.

There is certainly a surprising paucity of precedents in which market definition had played a significant role, but that is not the Court’s fault. Sousa Ferro observed, in a 2015 piece, that within a universe of 608 annulment proceedings concerning substantive competition issues, the issue of market definition was only raised in 134 cases (22%). Within those, the Commission decision under appeal was only wholly or partly annulled in 5 cases (3.75%) on the basis of an incorrect or insufficiently justified market definition, whilst in another 4 cases the Court expressed some dissatisfaction with the market definition but without annulling the decisions at issue. The article concluded that “applicants have only succeeded in persuading the Court that the Commission erred in its delineation of the market in 6.7% of the cases where the issue was raised”.

Whilst interesting, the figures presented in this recommendable article (one among the very few on the subject) may not provide the full picture. The selection of cases considered includes all types of competition cases, including those in which market definition was not required from the Commission (e.g. cartel cases) as well as, admittedly, the “very large number of cases” in which a precise definition would not have altered the Commission’s findings and that, consequently, failed to be examined by the Court. The analysis understandably also fails to account for the way in which arguments were pleaded or substantiated.

Other commentators – including experienced Commission litigators in high-profile abuse of dominance cases (remember Eric Gippini’s “It’s the dominance stupid!” intervention at one of our workshops) coincide in underlining the paucity of challenges to market definition and dominance in many of the abuse of dominance cases litigated within the past 20 years.

Note, for example, that market definition – and dominance – were not contested in a number of the leading abuse of dominance cases in the EU, including Intel,Tomra, Deutsche Telekom and Michelin II. And we haven’t had many other abuse of dominance cases brought before the Courts in the past few years.

Full annulments of market definition are certainly rare, although not unprecedented, as shown long ago by Continental Can, some time ago in Tetra Laval(merger case), more recently in CEAHR (concerning a decision to reject a complaint) and today in Servier. But the objective reality is that the Court has most often (albeit admittedly not always) undertaken a very thorough review of market definitions, and this regardless of the outcome of the case. If one looks closely at the case law, this has happened both in cases where the GC referred to the manifest error of assessment standard (e.g. Clearstream or Astra Zeneca) and in cases where it did not (see e.g. Wanadooor Telefónica). And the same is true of merger control cases, such as Tetra Laval or NVV.

So don’t let labels such as that of the “manifest error” standard fool you. A careful read of the formulation of the Tetra Laval standard of review (what President Jaeger has called “the forgotten paragraph”), and particularly an analysis of how it has been implemented in practice, reveals that Courts have a wide margin of review and that they can intervene whenever they are persuaded about possible gaps in the Commission’s analysis. [Btw, this confirms what our friends Fernando Castillo and Eric Gippini say in their excellent book, that “practice shows that the manifest error concept captures much more than a decision that is facially or self-evidently wrong. In a way, manifest is whatever the judges consider to be manifest”].

The trend is much more evident in recent years, and my take is that it is here to stay, particularly after KMEand Chalkor and perhaps even more following the Court’s enlargement.

And this makes sense, for if everyone were easily found dominant in a narrowly defined market, then the special responsibility would become ordinary and one could easily abuse the notion of abuse. Servier’s lawyers, who clearly did not buy the myth, actually made this point at the oral hearing citing the Bicycle Repair Man Monty Python sketch, showing how ordinary it would become if everyone were superman.

The bad news is that we may run out of material to continue this saga of posts…. 😉

A while ago, I wrote about ASCOLA’s conference at NYU School of Law. There was a bit I did not mention: at the same gathering, the ASCOLA General Assembly unanimously approved a Declaration of Ethics, which can be found here. The initiative seeks to preserve the integrity and trustworthiness of legal research. Ioannis Lianos headed the committee that worked on the declaration.

If you take a look at my profile on the blog, you will see that I now make it explicit that I abide by it.

By and large, this declaration overlaps with the principles that have guided the publication of pieces in the Journal of European Competition Law & Practice (JECLAP) since I became its joint general editor (alongside Gianni De Stefano). Because it is intended for academics, the ASCOLA declaration is stricter in some respects . In this sense, it is a wonderful complement to JECLAP’s policy.

At our last meeting, JECLAP’s editorial team endorsed the declaration. Accordingly, authors submitting a piece to JECLAP are assumed to abide by ASCOLA’s declaration of ethics if they claim an academic affiliation. We are confident other competition law and economics journals will follow, and we have no doubt our authors and readers welcome the initiative.

And since I am speaking ASCOLA: remember that, if you want to take part in the next annual conference – Aix-en-Provence (!), 27-29 June – you have until 15 January 2019 to submit your articles and extended abstracts (more info here).

These days, competition lawyers and economists spend a considerable amount of time discussing the rise in concentration and profit margins, or the decline of the labour share in the economy. However important, these challenges are not quite as critical as climate change.

It looks like no week passes without at least a new piece of alarming news about global warming and its consequences (just check here from The Guardian alone). The only reason for optimism is that we may be getting so close to the cliff edge that political actors may decide, at long last, to take radical and decisive action.

This year’s Nobel Prize in economics is a sign that things may be changing for the better. William Nordhaus and Paul Romer are two giants that have long deserved the award, but we all know that timing matters, and timing is often not a coincidence. Climate change, in fact, is expressly mentioned in relation to William Nordhaus.

I find myself thinking about climate change pretty much every day. Since competition issues tend to be in the back of my mind quite often too, you will not be surprised to learn that I sometimes reflect on the lessons that the latter can draw from the former.

Is there something that our community can indeed learn from the climate change challenge?

Ideologues will always dismiss expert evidence

Addressing the climate change challenge requires large-scale government intervention and international cooperation. Some conservatives cringe at this idea, which directly contradicts their worldview.

How do they relieve their anxiety and avoid reality? By bashing expert evidence. ‘We do not know whether global warming is actually happening, and even if it is happening we do not know whether it is truly man-made’ is a well-known position.

These same ideologues – a category that happens to include the current POTUS – also love to say that ‘the models used by so-called “experts” are not reliable and simply reflect a political agenda that favours intervention’.

Experts in the competition law community are often bashed in the same way, in particular economists. You are all familiar with these lines too: ‘economists’ models do not reflect reality’; ‘economists are corrupt’; ‘it is a flawed discipline that is fraught with biases’; or, even that ‘it is politics disguised as fancy math’.

Ideologues try to make it all about picking sides

It is not so difficult to read between the lines of ideologues’ mantras and clichés.

The (not so subtle) point is that anyone’s hunch about a given topic is just as valid and relevant as the expert consensus developed incrementally over decades. Since experts have a political agenda or are corrupt (perhaps even both), there is no reason to defer to them. If one’s worldview conflicts with the positions experts happen to advance, such positions can be comfortably ignored.

‘I don’t believe it’ is all one needs to dismiss a report involving 13 agencies and 300 leading scientists.

If expertise does not matter, it all becomes a game of picking the side one prefers. The quest for truth is no longer a worthy cause. What matters is to make noise and to advance one’s agenda.

We observe a similar trend in competition law. Law and expertise are being openly dismissed. Consensus positions, the body of knowledge incrementally refined over the years is seen, by many, as a dispensable and inconvenient obstacle. Such body of knowledge would be ‘out of tune’ with existing realities and demands. Who needs expertise if one can be ‘modern’ and deliver what politicians want?

There will always be opportunists

Some people are aware that climate change is real, is man-made and can have potentially catastrophic consequences, but side with ideologues. Why? For reasons of expediency. In the short-run, it may be profitable to deny climate change, as it may deliver some quick political and/or economic victories. For instance, I am always amazed that some Australian politicians are climate change denialists when their country is particularly vulnerable to the phenomenon and is already suffering its consequences.

There are opportunists in the world of competition law and policy, too. This is natural. Some stakeholders would benefit enormously if consensus positions were ignored, and if enforcement were turned into a discretionalist tool unconstrained by law (and courts).

The more discretionary (and the less legal) competition policy becomes, the faster the burden of proof is reversed, the easier it is for these stakeholders to influence the process and achieve the outcomes they favour. It is not a coincidence that claims that the law is not to be taken seriously, or that it should not be an obstacle to remedy pressing concerns, are frequent these days.

Expertise and law are the way forward

Ideologues and opportunists pose a challenge for the integrity of competition law and policy, in the same way that they pose a challenge for the fight against climate change.

Can something be done about it? I can think of two reasons to be optimistic.

First, a key way forward is to preserve the integrity and trustworthiness of academics, so that expertise is not pre-emptively dismissed by those who feel uncomfortable with it and would rather make it all about politics and picking sides. Fortunately, major steps have been taken in this regard in the competition law and economics community (we will inform about some of these soon on the blog).

The above said, academics should also make a greater effort to explain what we do: the quest for truth is never over, and consensus positions can (and do) always evolve. True researchers are not preachers or activists: they are always open to changing their minds, and to being persuaded by new evidence. Just to mention an example, there are reasons to believe that merger control has been too lenient in the past decades.

Second (and certainly more importantly), one cannot ignore that, at the end of the day, it is for courts to state what the law is. The temptation to see competition policy as a discretionary tool that can be used to save the world may be quite strong. However, competition law (at least EU competition law) is not about fine-tuning markets, but about showing why, in a specific economic and legal context, a given practice amounts to an infringement (or a merger to a significant impediment to effective competition). This analysis is subject to judicial review.

If there is something that my research has taught me, this is that the EU courts are prudent, and that they dislike, above all, arbitrary and unchecked policy-making.

The EU courts have always been particularly suspicious of administrative action that ignores expert consensus. Decisions that go against such consensus are invariably annulled when challenged (think of Airtours and Tetra Laval). Similarly, the EU courts are only willing to depart from the established case law where there are real and powerful reasons to do so, not simply because it is expedient or fashionable.

The Competition Law course founded by Luis Ortiz Blanco (and currently run by Luis himself and Alfonso) is one of the great traditions of our community. The course takes place between January and March in Madrid (at the IEB, literally around the corner from the landmarks you see in the pic above).

This year’s will be the 22nd edition of the course. The programme can be found here. You may also want to check the course’s website (with information about the individual modules and about how to register) here.

What Luis and Alfonso have achieved is truly unique. Top competition lawyers (judges, officials, practitioners, academics) gather every year in what has emerged as a great community.

As you will see in the programme, the course has three components:

Teaching modules that cover the main aspects of competition law (agreements, unilateral practices, mergers, State aid/public entities as well as the interface between competition law and regulation). I will have the honour to deliver the introductory session, and I will also be coordinating and teaching on the module on the interface competition law and regulation; Alfonso will be running the module on abuses.

Three half-day seminars bringing together some luminaries in our field. There will be one (coordinated by Eric Gippini Fournier and Fernando Castillo de la Torre) on competition law developments in 2018; a second one (coordinated by Cecilio Madero Villarejo and Nick Banasevic) on competition law and policy in hi-tech markets; and a third one (coordinated by Mercedes Pedraz) on private enforcement.

Three practical workshops (2h30min each) aimed at familiarising students with the practice of competition law enforcement.

For any practical question, do not hesitate to send an email to competencia@ieb.es. In any case, we will be sharing info on the blog about the half-day seminars in case you want to join us in Madrid!

Yesterday I was invited to take part in a round table discussion by the UK’s Digital Competition Expert Panel. Philip Marsden – a beloved speaker at our Chillin’ events – was there in his capacity as member of the panel, together with Jason Furman and Derek McAuley.

Whenever I discuss digital issues, I tend to emphasise the importance of legal certainty and consistency, and yesterday was not an exception. These are arguably the most important factors in ensuring the best outcomes for competition and innovation.

And bearing their importance in mind is particularly crucial when anxiety – from stakeholders and from politicians – is on the rise. If policy-making is driven by anxiety, it tends to be more volatile – and thus less consistent and less predictable.

These were my musings when I read that the Bundeskartellamt has started an investigation into Amazon’s practices (see here). The press release suggests that there is a significant overlap with the European Commission’s investigation. The central concern appears to relate to Amazon’s dual role as a marketplace and as a competitor to the very merchants that use the marketplace – the famous ‘conflict of interest’.

The Bundeskartellamt’s press release is surprising. Not because it signals that common carrier antitrust is on the rise (remember this post?), but because it appears to be impossible to reconcile with the authority’s position in relation to other matters, in particular online marketplace bans.

Our readers are certainly familiar with the Bundeskartellamt’s position in relation to online marketplace bans. This position has even been made public by the authority in many ways, including in a paper published earlier this year. This paper advances a heterodox and narrow interpretation of the Coty judgment (on this, see here and here). According to the Bundeskartellamt, online marketplace bans are prima facie unlawful outside the specific factual confines of Coty (that is, luxury products).

The policy behind the Bundeskartellamt’s position seems clear: online retailers should have as many opportunities as possible to reach consumers, and these opportunities must include marketplaces.

The economic consequences are also clear: the authority’s strict stance against online marketplace bans amounts to subsidising online marketplaces, in particular Amazon and eBay. No wonder these two firms have been overtly championing the same stance.

With the new investigation comes the obvious question: why would a competition authority subsidise online marketplaces and simultaneously time take action against them?

I, for one, cannot make sense of the two together.

By subsidising online marketplaces, the Bundeskartellamt would be strengthening their position, thereby worsening the very concern raised in the investigation announced this week. One could accept that, potentially, one of the positions advanced by the authority could make sense if considered in isolation. But I do not see how it is possible to make sense of the two together.

I would say more. None of the two concerns raised by the Bundeskartellamt is warranted, and the fact that the two are examined together is evidence of it. If there is something that Coty and similar cases (including those investigated in Germany) reveal, it is that online marketplaces are not in any way indispensable to reach end-users (and certainly not indispensable within the meaning of Bronner/IMS Health).

It is so clear that online marketplaces are not indispensable that many manufacturers, in many industries, take active steps to ensure that their products are not sold through them.

And if online marketplaces are not indispensable, what is exactly the problem with Amazon’s conflict of interest? What would justify imposing common carrier obligations to a service that is not comparable to a telecommunications or an electricity network?

These are the questions that I hope will be discussed explicitly and extensively in the coming months.

In the meantime, I will try to make sense of the factors that may drive the Bundeskartellamt’s behaviour, which amounts to pursuing two mutually contradictory policies. For the time being, I can think of the following explanations:

Missing the forest for the trees: the Bundeskartellamt’s (commendable) mantra has always been to keep markets open. If, however, the rationale behind certain policies is not acknowledged, and if the inherent trade-offs of intervention are not considered, there is a risk that inconsistent policies are pursued when action aimed at opening markets is taken. These policies may make sense when examined in isolation, but not when one looks at the broader picture.

Online retailers favoured at everyone else’s expense?: There is a clear set of winners from the Bundeskartellamt’s policy stances: online retailers. These would benefit from guaranteed access to online marketplaces; in addition, online marketplaces would be regulated to their advantage.
Perhaps the German authority’s implicit goal is to favour this category of operators (some of which will be SMEs). If so, this goal appears to go against the German competition law tradition. German competition law, as I understand it, has always (rightly) sought to protect competition as a process and has always (equally rightly) avoided micro-managing markets and picking winners. In this sense, formulating policy to favour a particular category of stakeholders seems to be against this tradition.

Two problems are better than none: There is an advantage in pursuing mutually contradictory policies. It keeps an authority busy. As described by Wouter Wils in one of his many great pieces, the desire to show a high level of enforcement activity may sometimes explain the behaviour of officials (and an organisation at large).

We greatly enjoyed yesterday’s conference and wanted to thank you all once again for making it possible, whether you were able to make it there or not.

The feedback we have received so far has been excellent. You can see some of it on our Twitter profile.

The atmosphere was great and confirmed that there are lots of genuinely nice people in our area of practice. Perhaps the legal rankings have a point in having something positive to say about everyone in the business… 😉

As is customary the day before our conference, we would like to express our gratitude to the conference sponsors. Their support is what enables us to offer this conference for free (and the food, and the drinks, and the gifts…)